EDI Transforming Business Models

For most of us, EDI is a
communication system to exchange formatted data between disparate applications,
however it is time to realize that the technology has potential to deliver much
beyond than what it was intended to. Since early 20th century
commerce had seen industries leveraging the opportunities provided by Express
mail and Telefax to grow network. Healthy and far-reached network implies smart
way of handling goods and providing services, optimization of cost and labor,
efficient processes and customer delight. Business growth, technological
advancement, and ever changing customer needs demanded for more swift and
complex information exchanging networks.

The
growing concern was addressed by UN recommended EDIFACT and ANSI recommended
X12 EDI standards that set to establish uniformity in business transactions defined
for each industry or operation segment. The principal vision was to establish
standardization and integrity of the business documents being exchanged amongst
trading partners. However EDI proved to be a state of art technology in many areas
starting from finance to processes. Following is an attempt to understand the way
EDI has contributed to the evolution of many processes, creation of
opportunities, and efficient management of resources in a supply chain.

A.Cost
saving and Visibility

In a supply chain as the
goods traverse from origin to destination information gets generated at the
occurrence of each event such as consolidation, cross-docking, warehousing etc.
Since world has moved from traditional 1PL (1st Party Logistics) to
3PL (3rd Party Logistics), current supply chain models have more
number of events in a shipment life cycle. Thus the information volume has
surged abruptly. In such a scenario exchanging information through electronic
means has made it possible for industries to transact millions of business
documents in a day that would efficiently facilitate movement of goods and
continuity of services. Now imagine effort required in handling same volume of
transaction in a day through paper and the time it would take to make the
information available? Clearly eliminating paper has restricted industries from
procuring it as a raw material for printing and expenditure on manual labor
cost for handling it. Customer queries on shipment status and tracking in these
days are better managed through shipment status update portals, feed to which
is supplied through EDI.

Inference: Logistics is
gradually moving towards a value chain that provides door-door visibility
dynamically to appropriate stakeholders at right time through EDI.

B.Growth
Orientation

Over years EDI has been
pivotal to accuracy in information, timely response, and establishment of reliable
network. Thus stakeholders like warehouse and manufacturers subscribing to EDI
have been able to optimize their inventory levels, follow Just-in-Time
technique for assembling raw materials, and reduce lead times. This has
provided industries buffer time to focus and invest on customer value additions
and business expansion.

Inference: EDI is now a
technology being harvested to gain competitive advantage over competitors for
growth.

C.Risk
Management

3PL industries continuously
need to improvise on the business models, bring innovations, and grow network
to sustain in the competitive logistics market. To address these problems
industries need to identify bottlenecks in the supply chain models, research on
market trends, and understand customer needs. In my opinion, analysis of large
volume of EDI transactions can help 3PL service providers to focus on right
areas for risk control. For instance, analysis of monthly volume trend of EDI
transacted for a year will provide insight on the system load variation. This
information should be helpful to 3PL industries to schedule system maintenance
during lean seasons to minimize impact. Similarly monthly analysis of EDI order
messages (X12 850) transacted can be helpful to forecast demand.

Inference: Industries can be
increasingly dependent on EDI to better manage their business.

D.Operational
Efficiency

Carriers have moved from
transporting break bulk cargo in packages to containerization, freight
forwarders have moved from just being sender of shipments to door-door service provider
through multimodal transportation, and logistics service providers have moved
from dealing with a fragmented supply chain to a collaborative network. A
closer look at these current operational models will reveal that each entity
such as shipper, carrier, equipment, customer etc. are connecting with each
other through EDI to an extent that provides them real time information to
execute processes. For example a load port can send EDI to discharge port with
information regarding the stowage position of vessel loaded container cargos
that can be used automatically by cranes to unload.

Inference: Harnessing EDI is
fundamental to evolution of swift and efficient operational models.

E.Customs
Services

Customs compliance and
clearance have always been a concern area for importers and exporters across
the globe as non-compliance could lead to heavy fines and delay in movement of
goods.However EDI has been successful
in providing a swift operational mechanism for both regulatory bodies and
business that would ensure security, compliance, and efficiency.For example, in contrast to the traditional
method of verifying manifest and manual inspection of inventories on arrival of
goods at the port of entry, Customs is now able to instantly verify manifest
and acknowledge the cargos before it leaves the origin.

Inference: EDI is now a
trusted entity for regulatory bodies to assist in establishing security and
regulations.

In broader prospect, EDI continues to revolutionize
many other sectors such as Banking, Health care, Automobile etc. I strongly believe
for business models to evolve it is important to harness EDI in right manner.

Comments

Really EDI (Electronic data interchange) is one of the most popular technology in the world. It is transforming different types of business. It plays an important role in online shopping business. You can share your electronic data through EDI system.